FUNO Announces Transcendental Changes. Industrial FIBRA IPO and ESG Transformation

FIBRA Uno (FUNO) has revealed two significant developments today. On one front, the real estate trust boasting Mexico's most extensive portfolio (by square meters) plans to establish a new real estate investment trust (or FIBRA) to consolidate all its industrial assets. On the other hand, FUNO is set to cease outsourcing its real estate services to bolster its Environmental, Social, and Governance (ESG) strategy.

FUNO's latest strategies showcase the trust fund's intent to streamline its structure and operations while reinforcing its commitment to environmental sustainability, all in a bid to fortify its investments.

Restructuring its industrial assets will enable more efficient property portfolio management, positively impacting investors' returns. Meanwhile, internalizing real estate services will grant FUNO greater control over its value chain and align its practices with international ESG standards, solidifying its position as an institutional player with corporate responsibility.
The New FUNO Industrial FIBRA

This week, FUNO has called for a general assembly of its investors scheduled for October 9, 2023, to discuss and approve the potential initial public offering (IPO) of a new investment entity that will segregate its industrial real estate assets. This new FIBRA will be listed on the Mexican Stock Exchange and established through a co-investment of capital.

According to data from SiiLA FIBRA Analytics, FUNO's industrial portfolio encompasses over six million square meters of gross leasable area (GLA), constituting 54.5% of its commercial property portfolio.

FUNO's new FIBRA will boast the most extensive industrial portfolio (by square meters) among real estate investment trusts nationwide, with six million square meters of GLA. For example, the trust's real estate assets will be 1.5 to 4.1 times larger than the industrial portfolios of FIBRA Prologis, FIBRA Terrafina, FIBRA Mcquaire, and FIBRA Monterrey, which each range from 1.5 to 4.2 million square meters of GLA.

Notably, one-third of FUNO's revenues stem from its industrial portfolio, yielding quarterly earnings nearing two million pesos (114,000 dollars). Consequently, the asset segregation could grant FUNO access to new investors and additional financial resources to continue expanding its operations and seizing growth opportunities in Mexico's industrial real estate market. However, it also presents risks and challenges, such as effectively managing and operating a separate investment entity.

 The Internalization of Key Real Estate Services by FUNO 

FUNO has taken a significant step in its ongoing pursuit of ESG leadership. The company recently announced the convening of a CBFI Holders Assembly scheduled for October 9, 2023, to propose the internalization of real estate services currently provided by FIBRA Uno Administración S.C. and F2 Services S.C., which currently act as the "Real Estate Service Advisor" and the "Representation Services Company," respectively.

The consideration process began with an initiative by FUNO's management, which their Corporate Governance Practices Committee assessed. The strategy behind the potential internalization of services is crystal clear: FUNO seeks to further strengthen its position in the ESG market, both nationally and internationally. The company believes that bringing these essential services in-house can further enhance its ESG performance and maintain its leadership in this highly competitive field.

To ensure a fair and thorough evaluation of this initiative, FUNO has engaged two renowned independent advisors: Goldman Sachs & Co LLC and the Robles Miaja, S.C. Law Firm. These advisors will oversee the financial and legal aspects of the process. Additionally, a rigorous review process has been implemented involving FUNO's Corporate Governance Practices Committee and Technical Committee.

FUNO's commitment to transparency and conflict of interest mitigation is an important aspect. Members related to the potential operation have refrained from participating in the initiative's evaluation, demonstrating a serious commitment to fair and equitable decision-making.

Following this initial evaluation, the initiative was referred to FUNO's Technical Committee, which decided to subject it to a vote at an upcoming Holders Assembly scheduled for October 9, 2023. During this meeting, FUNO investors can voice their opinions on the potential internalization of services. If approved, it will pave the way for future negotiations with service providers.

It's also worth noting that any resulting operation will be subject to a meticulous due diligence process and terms and conditions to be agreed upon in subsequent stages.

The potential internalization of FUNO's real estate services marks a significant milestone in the company's strategy and underscores its ongoing commitment to excellence in ESG. The October Holders Assembly promises to be pivotal in shaping this important corporate development.

For more information about the performance of FIBRAs in Mexico, explore SiiLA REsource or contact us at contacto@siila.com.mx.